Rates Uncertainty Has Borrowers Skittish

By Glenn Dyer | More Articles by Glenn Dyer

The big news from the lending finance data for July on Thursday was the nervousness of mortgage holders who continued to refinance existing loans.

The ABS data showed that borrower refinancing of housing loan commitments between lenders reached an all-time high of $17.2 billion after a rise of 6.0% in July (seasonally adjusted).

That took loans for the month to more than $49 billion, meaning the refinancing hit a 30% plus share of the total, which is a very high level. Owner-occupied refinancings totalled $11.3 billion and investor refinancings totalled $5.4 billion

ABS head of Finance and Wealth, Katherine Keenan, said: “The value of refinancing between lenders was 60 per cent higher in July 2021 compared to a year ago.

“This reflected borrowers seeking out lower interest rates, particularly for fixed rate loans, and cashback deals across a large number of major and non-major lenders, she said on Thursday.”

Even though there has been no talk of a rate rise this year or next, it is an intriguing sign that mortgagees feel worried about the cost of their loans and are locking them in.

Banks and other lenders have helped feed that feeling by pricing fixed interest and variable loans to try and catch the attention of worried home owners.

Interest rates on some of these loans though have edged up in the past month or so.

The value of new housing loan commitments, excluding refinancing, rose 0.2% in July 2021 (seasonally adjusted). The number of owner-occupied lending though dipped 0.8% in the month but rose 4.9% in value.

The ABS figures showed first home buyer loans fell 6.8% in July, following a 7.8% decline in June, and have now fallen 20 per cent since January 2021.

Loans taken out by investors however rose by a further 1.8% in July to be a huge 98.7% higher over the year but the volume and amounts remain low.

“Investor loan commitments have seen an unbroken period of growth since October 2020,” Ms Keenan said in Thursday’s statement.

The ABS shows the heat continues to go out of the housing finance market, raising the question of when the price boom in cities like Sydney and Melbourne will come to an end.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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